Higher Incomes, Lower House Prices, or Lower Interest Rates?

During their latest episode of the VALUE: After Hours Podcast, Taylor, Carlisle, and Mowery discussed Higher Incomes, Lower House Prices, or Lower Interest Rates? Here’s an excerpt from the episode:

Tobias: I think it’s bad for society. It’s bad for business, but it’s also bad for society. I think there are a lot of markets around that have got this same quite– not quite, but characteristics. The housing market is one example where housing is on record unaffordability, because you have house prices that haven’t quite got the message that rates are up, because everybody expects rates to go back down. And so, either incomes have got to go up 50%, house prices come down 35%, or rates go back down to 2% or something like that.

I think, Kyle, you said something like that similar in relation to those small caps. It just doesn’t make sense to have the prices where they are and the fundamentals where they are. At some point, there has to be this equalization, but you got to work out which side moves. I think it is prices tend to be the easiest thing to move. But who knows? What do you think?

Kyle: Well, housing, I am surprised that prices are where they are and we’ve quite frankly been avoiding most of the housing sector, because it’s a little bit in the too hard pile for us. But there’s smart people on both sides of that one. There’s a lot of millennials and Zs that are trying to build households. There’s not that many houses out there. It’s not much land being, at least where I live, certainly down south and whatnot out west, mountain west or whatnot. But I don’t know. Too hard.

Tobias: There’s short-term rentals impacting that market, I think, a little bit. I follow some of the housing bears. They seem to think that there’s a lot of that short-term rental like Airbnb and so on is influencing that market. A lot of people have been using those. That’s not a bad small business. You put up some hundreds of thousands of dollars, get control of something, and run it as a little business that throws off some money. But it requires that you get the bookings, which–

Jake: Yeah. [chuckles]

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